Reacting to my post, several readers dug in their heels against the idea of trading prospects in general. Their reaction is probably best summarized by OldYankeeFan’s comment:

I would NOT give up any prime meat for a 2 year rental.
You never know who is going to make it large.
We dangled Mo, Cano and others in the past. Fortunately, they weren’t taken. AJax was!

Remember. THE DYNASTY WAS BUILD ON THE BACKS OF FIVE HOMEGROWN PLAYERS!!!
That will NEVER happen again if we keep trading our better/best prospect for ONE shiney object.

I share some of this instinct, but I think it is misguided. Obviously, if any given talented group of prospects were going to turn out to produce all of (or really, any single one of) Mariano Rivera, Jorge Posada, Derek Jeter, and Andy Pettitte, you would handcuff them to the team and throw away the key. But we know that’s not the reality. All four of those players have an argument for the Hall of Fame, and two are arguably the best players ever at their position. Prospects turning into these four players are rare events.

However, in the realistic world, even successful prospects rarely become Big-4 level. Most of them come slightly-below-to-slightly-above-average major league players, if they become MLB players at all. Take a guy like Tyler Austin. He is a very solid outfield prospect. While he doesn’t have a huge ceiling, Austin is a serviceable outfielder who looks like an above average to very good hitter. You could easily see him hitting .290/.350/.460 for a long career, putting up 2.0-3.0 seasons with some regularity. At the same time, you could see Austin never hit much of anything above Double-A, get stuck at 1st base, or become a career platoon or bench player. Taking all this information, you could (in theory at least) come up with a probabilistic value for Austin’s future. Let’s say Austin is worth 8-10 WAR over the next 8 years on average, for sake of argument.

The wrong way to think about Tyler Austin as a prospect is, “He might be a future X wins contributor, therefore the Yankees should keep him.” This is prospect hugging, and leads to both misallocation of wins (more on that later) over time, and probably overestimates their future probabilistic value.

To back up: Let’s assume that all major league teams are equally good at evaluating how valuable prospects and current MLB players are (a fallacious assumption, but necessary for the thought experiment). Obviously, if the Yankees think they are fleecing another team, they should make that trade, but those opportunities are rare and impossible to predict. When we make this assumption, what we can see are three reasons to make trades. The first two are unimportant for this post: financial flexibility (Rays trading away James Shields) and addressing positional strengths and weaknesses of a roster (Rays trading Young for Matt Garza). But the third is what trading prospects are all about: trading short term wins for long term wins.

If both teams are evaluating prospects and MLB players equally, that’s what is going on. One team is contending for the playoffs now, and needs wins in 2013 or 2014. Another team is rebuilding, and wants to accumulate wins in 2015-2018. Because the wins take place further in the future, like any financial transaction, the team trading for the prospects likely demands more value over long periods of time. So, if the Yankees want to acquire X wins in 2013, they are probably going to have to give up at X + Y wins to get them. Call it the iron law of baseball yield curves.

A big budget team like the Yankees can afford to trade away some of their long term wins in order to acquire short term wins, then make up the difference on the free agent market. Therefore, it makes some sense for the Yankees to more often than average trade away their prospects. The real question is: how often?

I don’t think the Yankees can survive today’s budget environment without sometimes holding back on trading away future wins. They don’t need to sit back and rebuild nearly as much as other teams, but as long as every big free agent contract they sign doesn’t miraculously work out amazingly, they are going to need to be sellers: trading away present wins in order to acquire future wins. I made this argument about the potential for trade deadline selling two weeks ago.

But there’s other things going on here. By trading for Chase Headley, you’re getting more than just two seasons of his service. You also receive two seasons of exclusive negotiating rights, which extension after extension have proven to be very, very valuable. You could sign Chase Headley to a long term deal, and secure many future wins.

I think this is a strong model for the Yankees to follow. They should not be trading their cheap future wins right now for 1-year rentals that they intend to discard as soon as they reach free agency. Instead, they should target players that they intend to sign to long term contract extensions, or are already signed to big contracts. The Tigers and Phillies did the former with Miguel Cabrera and Roy Halladay, and the Yankees did the latter with Nick Swisher and Curtis Granderson.

What you’re really doing here is trading cheap future wins for expensive future wins. The Curtis Granderson trade is a good example of this, as were a lot of classic Yankee trades that helped build the 90s dynasty teams (O’Neill for Kelley, Clemens trade, Tino, etc), and one of the most underrated trades in franchise history: Alfonso Soriano for Alex Rodriguez.

Obviously, there’s a limit to how expensive your future wins can be. If the Yankees could afford to trade for two Chase Headleys (say, Headley and Elvis Andrus) and re-sign them to big long term deals, I would totally pull off both trades. But I’m not convinced that the Yankees can pull off two long term deals. I’m in favor of keeping the cheap future wins of Mason Williams, Tyler Austin, Manuel Banuelos, and Gary Sanchez while exchanging the cheap future wins of Phelps, Heathcott, et al. for the expensive present and future wins of Chase Headley.

18 thoughts on “The Right and Wrong Ways to Think About Prospect Hugging”

chris

EJ, your point would be good if it were just "prospects" but Phelps is a legitimate starter for the Yanks and there are only about 4 teams in all of baseball where he would not be the number 5 starter and the number 4 starter for seven or eight teams. Montgomery figures to be in the Pen this year at some point as well. Trading away a number 4/5 starter under team control for a long time for a 1b/3b when we already have 3 guys to play that position later this year is reactionary. Where does he play in 2014? Given that the Yanks go into 2014 with only CC as a sure thing (Andy, Kuroda are likely gone and Hughes is in a walk year), trading away a legitimate starter to get through this year is just plain dumb given that, if all goes well, Headley will have no where to play come July/August (no way the front office has AROD on the pine given what he makes).

March 13, 2013

Lazlo's Other

Where the wins you are trading for come from is also a consideration. Healdley plays third, and Alex is under contract for quite a while yet. Tex is at first when he comes back. They've got to find at bats for Youk. Could Chase play a corner outfield spot when Alex comes back? Does NY just DH Alex? Adding Headley would create a log-jam in the second half – if y9u can't maximize his playing time you can't maximize his "wins".

Phelps is a pitcher, and some of the rotation is long in the tooth. Kuroda and Pettitte will not be around much longer and the free agent market isn't what it used to be.

I'm not for hugging prospects unreasonably, but I'd take a pass on Headley. With Curtis' contract expiring and Jeter and Ichiro approaching 40, an infielder who could play short or a corner outfielder would be more interesting to me.

March 13, 2013

James Dogg

Learning from history is good. 54 days after Derek Jeter signs with yanks George is banned from running team. Truth is the "core four" got their chance to develop because for the majority of their early minor league career the Yanks stopped trading the future for the present, in part due to George being banned. I love Curtis, but Detroit won that trade- and the last 2 playoffs against the Yanks with the folks we traded for Curtis. Keep the prospects.

Learning from history is good. Truth is the "big three" got their chance to development for the majority of their minor league career, but the Yankees decided to stop not trading the future for the present, and hang on to Joba and Phil Hughes. The result was that both significantly underperformed their value circa 2008, and instead of using them as trade chips for Miguel Cabrera, Cliff Lee, Roy Halladay, etc, the Yankees opted to hold on to them.

"These four prospects turned into X, Y, and Z" is a bad argument. Sometimes, prospects fail. Sometimes, they work out. Sometimes, they work out spectacularly. We shouldn't assume that our crystal ball on Slade Heathcott is any more accurate than anyone else's. The real question is: Is the short/long term or cheap/expensive swap worth it for the Yankees.

March 13, 2013

Frank S.

Interesting article. Just one correction, though. Your use of the O'Neill and Clemens trades as an example of trading cheap future wins for expensive future wins is kind of off the mark. First, O'Neill was traded for Roberto Kelly, not Mike Stanley, and, at the time of the trade, both players were entering into their prime seasons. So that trade was really more of the "addressing potential strengths and weaknesses of a roster" variety; the Yanks were looking for patience and possible lefty power; the Reds were looking for a toolsie centerfielder. Second, the Clemens trade was expensive future wins for expensive future wins, since the Yanks sent David Wells — a pricey veteran coming off an All-Star season where he was arguably the MVP of the Yankees postseason — the other way. I think that trade was unique and fits none of your categories. It was largely about the Yankees ridding themselves of a really good pitcher who management didn't really like as a clubhouse guy and acquiring a "future HOFer" and box office draw (and a guy the Boss always wanted).

Totally saw the Kelley/Stanley typo last night and forgot to correct it. Thanks for the catch.

March 13, 2013

Derpy

You have to always remember the purpose of the minor league system and the prospects that reside within: they produce major league players. That is the purpose. It doesn't produce all stars. It doesn't produce super stars. It produces major league players. Meaning average. A successful prospect is one who has value in the major leagues. It doesn't matter if this value is as a starter, platoon player, or a bench player. All have value, all are successful prospects.

You have to keep this in mind when talking about prospects. Success means value, not superstar. When you hear a guy is a great prospect, it means he has a good chance of being a successful prospect, aka major league value.

March 13, 2013

Mister D

And one of the ways the minor leagues can produce major leaguers is by helping us trade for them.

March 13, 2013

Aghast

Really? Is this the type of drivel this site is going to post now? Thanks.

I thought this article was strong. You make some good points. I think we should stand pat though on this front and fill our needs internally. We'll be pretty much back to normal a month into the season.

March 13, 2013

hawaii dave

Trading future wins for short term wins is the intellectual talk of accountants. You need to take into consideration the idea that many Yankee fans want to see homegrown talent rise to the team and experience the emotional joy of watching core 4 types grow and bloom as major leaguers. I would not enjoy an entire 25 man roster of home growns playing to last place every year while waiting for them to gel, but I'm not a type of Yankee fan that needs to win the ring every single season to be a success either. I want a competitive team of as many home growns as possible, with enough free agents as necessary.

Give me a successful team that wins a lot, and I'll find ways to enjoy watching them play as a fan. I'd be delighted to watch new versions of Jeter, Mo, etc play for 15 years at a very high level, but that's just not something that happens all the time. You can look at, for example, the 76-79 teams and find plenty of iconic Yankee personalities and moments which were not home grown.

March 13, 2013

James Dogg

While I do not fully agree with it the ratcheting up of the % of salary cap fine that is the stated reason for the "get below $189mil" mantra from the Yank management, is exactly the response the ratchet intended to have – to stop other teams from being the rich market teams "super farm systems" and make the idea of developing home grown talent more financially appealing. While this is not to serve those fans who may want this, it is as close to trying to get something like the effect of the reserve system back in baseball, the weird economics of baseball – in that players are paid for what they have done more then what they will do (See: Pujols, and maybe Cano) plays into this as well. Comparison of the late seventies as a busniess modle is flawed due to the major changes in the business of the game– I think the fans would tolerate missing the playoffs with youth for a seasn then another first round loss with milliondollar 32+ aged players getting the $ for things they did for other teams-

This is a bit of a straw man. The choice isn't between "lose for a year, then win a bunch with young players" (I'd support this) and, "keep winning with high-priced veterans." Hawaii Dave's argument is much more nuanced than this: his choice is, "Win less, but enjoy it more because your players are more home grown." and "Win more, but enjoy it less because your players are less home grown."

That the economics of baseball have changed is immaterial to his argument.

March 13, 2013

James Dogg

I agree with your analysis of his comment- my point is the goal of the ratchet in the salary cap is being sort of reached– or, at least in that it gives the Yank management some excuse to alter their spending ways of the past by lip servicing economic goals as apposed to performance goals– – but the economics is not immaterial to the structure of the actual team albeit– it may be to his imagined team– case in point Youklis– think the yanks get 12 mill of baseball out of him? They are paying for past performance hoping it comes back, they are also not trusting lesser knowns to given them comparable (remember he signed before Granderson, Tex injuries) Is he Dave's
"enough free agents as necessary" or if the 189 mil desire was not driving the decision would Yanks have pursued a different more long term approach? Economics of the game is what the structure of the team is produced by under the current thinking in yankeeland– short sighted as it may be– certainly not taking into account Dave's longer term views – sadly neither of your win/enjoy ratios seem to matter to those making the decisions- it is do this maintaain some sense of viable, ride out Jeter and look to increased profit margins in future– half a horse thinking

March 13, 2013

Mister D

Jeter, Mo, Posada and Andy – all four are worthy of HoF consideration but when you say that two of them could be the best ever at their position, can I assume you were counting Mo twice (because he is just that awesome)?